Wall St. Warrior – Sunday, May 06, 2012

Wall St. Warrior – Sunday, May 06, 2012

Monday, May 7th, 2012

Technical Picture – Short Term Correction

From the weekly SPX chart above we note that the RSI usually signals negative divergence to higher prices and positive divergence to lower prices ahead of a major trend change or significant correction.  The exception was the flash crash of 2010.  So far this year, we have no RSI divergence signal, so the assumption is that we will make higher highs in the near term.

The daily SPX chart below did signal negative RSI divergence to higher prices and the current price action shows that we have been working that off through short-term corrective price action.  The mathematical Fibonacci levels in play are extension long with a target of 1454 (23.6% FE). The anchor is October 2011 high.  We anticipate that the ambush zone will hold as support and will be followed by eventual new highs.  If new highs signal negative RSI divergence on the weekly chart, we will anticipate that a larger correction will follow and lead us back to our longer term trendline on the weekly timeframe.

As depicted on the chart below, the DOW made a minor new high on May1st, but was unconfirmed by all the other major indices.  Non-confirmation of new highs and lows, usually leads to fast collective moves in the opposite direction.  Keep this chart handy as we note that the QQQQs are correcting at a much faster rate than the broader indices.  If, for example, the DOW fails to confirm lower lows, it would foreshadow a reversal of the short-term downtrend.

5 Comments

  1. This guy does free analysis. Pretty sick!

  2. Dean says:

    I’d be interested in seeing what your thoughts are on today’s market. With the Dow being the highest it’s been since 2007, I’d say technically, we’re in for some red days. What do you think?

  3. What’s up, its good article on the topic of media print, we all be aware of media is a great source of data.

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